15/1/2023 Portfolio Update

 Hello everyone, this is the King of Passive Loss (KOPL, as opposed to passive income) with the first post of this blog. I'd like to begin this blog by introducing everyone to my starter portfolio currently as of age 18. To preface, by no means do I claim to be some financial trading guru or trading Nostradamus. In fact, as to what my name alludes to, I am probably located at the left tail end of the trader bellcurve. Regardless, I hope to give some insights to the mentality behind any moves I make so as to educate, entertain, and to possibly serve as a cautionary tale to what you should NOT do when trading. To add on, I like dividend investing but do not be mistaken, for I most certainly have a (reckless) high risk appetite. 

To start off, my current portfolio consists of two tickers that are found in the Singapore Exchange (SGX) which are of the following that are held in my Tiger broker account:

Screenshot of Tiger Account

- 2 Lots of Keppel Corp

- 8 Lots of United Hampshire REIT

with around 1.1k SGD to serve as my War Chest

I will be deploying some of the cash to purchase 1 more lot of Keppel Corp when the market opens this Monday (16/1/2023) as I believe that the recent Sembcorp Marine and Keppel Offshore Marine merger will go through. To be very honest, I have no intricate investment thesis as to whether the Sembcorp Marine Shareholders will vote yes for the merger proposal, but I do believe that it is beneficial for both KC and SMM shareholders.

Firstly, for KC, the deal is definitely attractive as it allows KC to offload a loss making segment (Oil) at an attractive valuation. According to press releases, the NAV will drop by approximately 24 cents per share, in return for 19.1 SMM shares per KC share (at approximately 13.9 cents each at the time of recording). Many have said that KC price will drop the corresponding $2+ after the distribution of the shares in species from the current $7+ price, which I humbly disagree. KC has been trading at a valuation of x1.05 book value in recent times, thus, I find it hard to believe that by cutting out toxic assets, it would drop by the $2. I find the next scenario of KC increasing to $9+ and then dropping back to low $7s to be more likely to keep near to the x1 PB valuation. 

For SMM, the deal is beneficial since it is no secret that the oil and shipbuilding industry is one rife with cutthroat competition with slim margins. Should KOM and SMM merge, it may not be immediately beneficial in the short term, but it would be the only surviving chance for the combined entity via the reaping of internal economics of scale and inheritance of KOM's relatively large order book, lest SMM continues to issue rights issue after rights issue, exacerbating the dilutive effect on minority shareholders. 

Even if the merger deal were to be called off, I have no problem with holding KC long term, as I believe in the management's 2030 vision and see the deal as a step forward to their desired asset light business model, allowing me to collect a non negligible 5% dividend to reward me for my patience. 

As for my rationale of picking up United Hampshire US REIT, it is a simple one; I find it incredibly undervalued. Why is this so? Well, we all know that the current inflationary environment has resulted in the US Fed to respond with aggressive interest rate hikes that greatly impact US REITs, but I find the defensive portfolio allocation of Hampshire REIT consisting of strip malls with strong grocery anchor tenants coupled with self storage units to be a desirable one. With high interest rates to hopefully combat demand side inflation, there is a real possibility for a recession to be coming which markets have already started to price in, despite the recent rallies. I believe that consumer spending would inevitably transfer from dining out to home cooking, which would allow the REIT some room to have relatively higher positive rental reversions with its tenants. Trading at around 11.8% dividend yield, it surely is an attractive ticker to accumulate for me. In terms of debt profile, it has no loans maturing till 2024, which analysts expect is the time when the Fed starts cutting interest rates. Additionally, if you look into the management of the company, I have confidence that they have the connections to secure advantageous terms for debt refinancing. 

To close off my brief thoughts, I would like to share with everyone that I am currently eyeing Fu Yu corporation stock, which I will probably elaborate on in the next post (god knows when) and continue building on the ideas I have discussed in this post. This is my first time producing investment-related content, and I do not claim to be any 'expert' whatsoever. The content of this blog should not be interpreted as any financial investment advice whatsoever. I welcome any constructive criticism, thank you.